The Downside To Alternate Payment Systems

By cwaltersJanuary 8, 2008

If you use services like Bill Me Later, eBillme, or Pay Payl’s Pay Later—payment options designed to let you pay online without using a credit card—you should be aware of the risks as well as benefits that come with them, writes SmartMoney. The most important thing to consider: as far as FICO is concerned, you’re applying for a line of credit (with the potential for high interest rates) when you pay with one of these systems, and your credit score may drop accordingly.

Opening one new account could push a solid credit score of 707 down to 697 for six months, according to Fair Isaac’s FICO Score Simulator, which gauges how consumers’ actions affect creditworthiness. Even worse: Your score could drop by as much as 100 points if you come close to maxing out the line of credit, says Detweiler.

Fraud protection is also different compared to what comes with credit card purchases. Each payment system is different in this respect, so be sure to check the fine print and know what risks you’re assuming before you agree to one.

Frankly, we can’t see the benefit of using these alternate payment systems except for cases when the customer actually owns no credit cards at all—if you’re using it for short term financing, maybe you should ask yourself if you can put off the purchase until you save up enough money to buy it outright. Otherwise, if you’re really concerned about online security then we (and many of our readers) suggest paying with single-use credit cards, which are available from some banks and now from PayPal.

I was a big idiot last year, because I signed up for one of these by accident.

I ordered some flowers from a group of people as a gift, and thought it would be easier if I received a physical bill in the mail so that we could split cash/checks up later. Thinking that 1800Flowers would send me a bill for the one purchase to my mailbox, I clicked the “Bill me later” icon.

What I didn’t know was that by clicking the button and putting in my mailing address, that I would actually get a CREDIT CARD bill in the mail a month later.

Needless to say, I called them that day, and canceled the card. I already have enough credit issues, I don’t need them sneaking up on me. Maybe it asked me to read terms and I didn’t, or it was clear and I’m a dope, but I’m pretty sure there was nothing on that site that led me to believe I was signing up for a credit card.

If you ask me, the “pitfall” of these alternate payment methods is that they’re sneaky liars, and I already have enough regular creditors that qualify under that title.

I tried these guys and everytime they tried to charge me late fees or some other fees on top of my purchase. Last time I used them, I had three months no payments and I paid the amount in full the second month and they tried to tack on a late fee because I did not make a payment for the first month.

I do not like BillMeLater and have closed that account. I would advise anyone who has one of these accounts to watch your bill very carefully and do not hesitate to call them.

Also your repayment to BillMeLater is limited to only with your bank account. No other line of credit may be used to pay down your balance.

What about Telecheck? I tried to use Amazon.com’s “pay directly from bank account” feature (note: does not postpone payment, or at least not that I’m aware of; I even had my debit card handy and decided to go with this feature anyway, since it promised to enter me in a contest for a $500 gift certificate) and now it seems that I’ve stepped in something stinky. The purchase was “declined”, and the email Amazon sent me mentioned Telecheck, whom I’ve never heard of and whose name appeared nowhere on Amazon’s site. I called my bank, concerned, and they said that everything was fine and there was no reason an “electronic check” for that amount would be declined. They advised me to call Telecheck.

Welll…Telecheck is a big, nasty-sounding mess of phone options and no human (do what gethuman.com says and you get hung up on…ew), and from the sound of it, they’re a credit-related organization. WHAT THE HELL, AMAZON?! If it’s on my credit report now that I applied for and didn’t get some credit account, when I was absolutely misled to believe this had nothing to do with credit, then somebody’s going to hear from my lawyer!!

It’s not a credit card or anything like that. At most retail stores, they run the checks through a verification service such as Telecheck to make sure you’re not a deadbeat. I don’t know why you were declined, unless you typed in the routing or account number wrong. Or perhaps shit just happens. One of my checks at Target got kicked out by their verification system once for no reason at all.

Also forgot to mention, I make sure with anything credit card or bill me later related, that I would have that stuff paid off period before any period expires for the interest, and the funny thing is when I have amassed finance charges that its been far less than $10 for 2 yrs, so bah.